How many IRA account can you have?

Question

Scenario 1 - I have a Roth IRA that I contributed to. Then I also have a Rollover IRA which I roll over my 401K from my previous employers into. Can I still open a Traditional IRA or is it the same as the Rollover IRA? So are you limited to one after tax and one before tax IRA?
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Scenario 2 - Is there a limit of how much of your pretax income can you contribute to either a 401K or a traditional IRA? Someone told my brother that he cannot contribute to a Traditional IRA, only a Roth IRA and I don't understand why. He does not owe any IRA currently, he only make contribution to his 401K. Is it because he reaches a certain limit with his contribution with his 401K that's why he can't open an IRA with his pretax income anymore?

Answer 1

You can have multiple IRAs, just that its a bad idea to have more than 1. Why? It may be difficult for you to track your investments, you are probably paying custodial fees for each IRA, you are probably too diversified that you are not earning a high rate of return.

Scenario 1: Your rollover IRA is a traditional IRA. Currently you can only roll your 401k into a traditional IRA. 12 months after that, you can roll it over again into a Roth IRA.

Scenario 2: In IRAs (either traditional or Roth), there is an annual contribution limit. For 2006-2007, you can contribute up to $4000/year ($5000/year if you are age 50 and above). For 2008, its $5000 ($6000 if you are age 50 and above). In 401k, there is also a contribution limit. For 2006, there is $15,000 limit ($20,000 if you are age 50 and above). For 2007, its $15,500 ($20,500 if you are age 50 and above).

You can contribute to a Traditional and Roth IRA as long as your total contributions does not go above the annual limit. So basically, you treat your contributions to Traditional and a Roth as one contribution.

Something you should know: Not everyone can get a Roth IRA. If you are single and your adjusted gross income (AGI) is above $110,000, you cannot get a Roth IRA. If you are married and filing jointly (or qualify widow(er)) and your AGI is above $160,000, you do not qualify for a Roth IRA. If you are married, but filing separately, and the spouse lives with you, you do not qualify for a Roth IRA if your AGI is above $10,000. Recently, Congress past an act that says that anyone can have a Roth IRA starting in 2010. Until then, if your income is above a certain limit, then you should setup a Traditional IRA and later move it into a Roth IRA.

Answer 2

I think the first scenario answers your first question. You have a rollover and a Roth so thats 2. So there apparently arent limits to how many. Why would you want to open a traditional IRA after a Roth anyway? You will just be spreading money out for no reason.. Is it because you want to receive returns from both? I dont get that. Just buy stock then...

For the second part; I think there IS a limit you can contribute ANNUALLY. Im not too familiar with Traditional but I have a Roth and I rolled over my 401k pretax money to the Rollover IRA and then the Roth. There is no limit you can rollover to Roth. You can rollover the whole thing, just be prepared to pay taxes on it at the end of the year. As far as the 401k question. There is no limit to how much you can contribute to your 401k. Go and read your companys 401k plan of information or whatever its called. You can contribute to exhaust the match they give you or keep going. Its all on you. I think these IRA's require 2500 minimum or something like that. Who is this someone that told you he cannot? Was it a representative of that company? You have options as to what to invest in. Usually they explain the benefits of each and whats best for your future plans.

Go here:

www.fidelity.com

Thats who I am with. look up the information on there. There is only so much I know. I am not a rep...

Answer 3

1. You can have as many IRA's as you want.

2. You can only contribute a certain amount to IRA's and 401k's in each tax year. The limit this year for a 401k is $15,000 if you're under 50 and if you're over that you can contribute an additional $5,000. For IRA's you can contribute a total of $4,000 total for all IRA accounts whether they be Roth or Traditional. You can split your money between them if you wish. If you're 50 or over you can make an additional $1,000 catch up contribution.

Also, you can contribute to an IRA and a 401k at the same time, however, you cannot take a deduction on your taxes for an IRA contribution if you have access to an employer sponsored 401k plan. I think it's best to max out your 401k contributions before contributing to anything else, especially if your employer matches some of your contributions, which most do.

Answer 4

You can have as many IRA's as you want.